The 50 Year Mortgage, a relatively new way to finance a home, has been seen on the marketplace as an antidote for those trying to find their way into a home loan with the high cost of housing. When one hears 50 year mortgage, they immediately think that it is in the same category as the 15 or 30 year fixed rate mortgages that we hear about constantly. But au contraire real estate buyer, think again and think twice before getting into one of these hybrids.
The current 50-year deals are not fixed-rate for five full decades, but rather adjustable deals that carry their offered rate for just five or seven years — or which carry a balloon payment after 30 years — and which then could have the rate move up or down for decades to come.
Anthony Hsieh, president of LendingTree.com, said in a recent statement about the new 50-year deals that “mortgage lenders are getting craftier with their product offerings to get the attention of consumers.”
He did not say that consumers always benefit from that kind of creative thinking, and said in an interview that he doesn’t think 50-year mortgages will get much traction, in part because consumers may wake up to the idea that this is a deal borne more out of desperation than sound financial thinking.
“If a consumer looks at a 50-year mortgage as the only way to afford that home, to get into a hot real estate market or simply to afford the monthly payment in a refinance, they’re really not looking at the potential problems,” Hsieh says. “It’s a very small portion of the consumers who could use this the right way.”
The “right way” would involve using the longer amortization schedule to drop initial payments expecting that there will be a significant increase in income to cover any adjustment in mortgage rates or the costs of a refinance just a few years down the road. via the QCTimes.com
